In Australia, 1 in 5 new cars are purchased with a car loan
A whopping $8.5 billion was borrowed to purchase new cars just in the past year.
Aussies love new cars and it appears we don't shy away from car loans to finance our purchase. A finder.com.au analysis of Australian Bureau of Statistics (ABS) data has found that in the 12 months to November 2017, there were 1,182,631 new cars sold and 236,451 had car loans attached to them.
That's 1 in 5 new cars that were purchased with a car loan during that period, totalling $8.5 billion lent.
With the average car loan interest rate being 6.3% p.a. and the average financed car selling for $35,797, we found that around $536 million will be paid in car loan interest in 2018.
While this sounds like a lot, car loans can be one of the cheapest ways to finance a new vehicle purchase. As the car is used as security interest rates are extremely competitive. Some lenders can offer interest in the 5% p.a. range, which is much more competitive than what you will find for an unsecured personal loan which can have interest rates of between 10-20% p.a.
However, there are other financing options new car buyers can consider, such as dealership finance.
One point to remember when selecting finance to help purchase a new car is depreciation. While you're still paying off the original value of the car, your vehicle will be losing value. So make sure you select the shortest loan terms you can afford and choose a loan that will be flexible to your circumstances.
However, ABS inflation data shows cars are getting more affordable. A car that would have cost you $20,000 in the year 2000 would only cost $16,753 now – a drop in price of about 16%.
And with 2017 being a record year for car sales in Australia, we certainly are taking advantage of the affordability.